Ed Yardeni: I Just Raised My Recession Odds

Summary

• Raises probability of a negative outcome (recession, market correction, bear market) from 20% to 35% due to geopolitical tensions and oil price shock, but maintains a 60% base case for his "Roaring 2020s" thesis driven by strong productivity growth.
• Argues current inflation spike may echo the 1970s but key differences—strong productivity and U.S. energy independence—make the economy more resilient; leans toward inflation not being structural.
• Highlights resilience in earnings, particularly from Information Technology and Communication Services, supported by productivity gains and efficient corporate management.
• Identifies $85 trillion in baby boomer net worth as a critical, under-discussed support for consumer spending, though this cohort is vulnerable to a stock market decline.
• Warns of layered risks (oil/inflation shock, AI job displacement fears, private credit stress) that, while manageable individually, could combine to trigger a recession.
• Believes market complacency is superficial; beneath stable indexes, there is turbulence in sectors like software, airlines, and energy.
• Maintains a long-term target for the S&P 500 to reach 10,000 by the end of the decade, with a nearer-term target of 7,700 by year-end.
• Maintains a bullish long-term target for gold to reach 10,000 by decade-end, with a 2024 target of $6,000/oz, driven by central bank demand, geopolitical hedging, and its role as a portfolio diversifier alongside equities.
• Views corrections as buying opportunities, not reasons to panic, and advocates for balanced portfolios including bonds and gold as hard assets.